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A and B share profits in the ratio 8:1. C receives a 2/9 share, taken entirely from A. What will be the new mutual ratio of A and B?

Answer and explanation

Correct answer: 6:1

The governing principle is that when the incoming partner’s entire share is taken from one old partner, only that partner’s share changes. A’s old share under the ratio 8:1 was 8/9. C receives 2/9 entirely from A, so A’s new share becomes 8/9 − 2/9 = 6/9. B does not sacrifice and retains his old share of 1/9. The new mutual ratio of A and B is therefore 6/9:1/9 = 6:1. Hence option C is correct. Option B is merely the old ratio, option D does not subtract the full amount transferred by A, and option A results from an incorrect reduction. The shares also remain consistent with C’s 2/9 admission share.

Related tags

AdmissionNew Mutual RatioSole SacrificePartnership AccountsNew Profit Sharing RatioReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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